Something has come up over the past week that I just don’t understand. There was an announcement by a financial company about some research they’ve done to come up with a $20 rule for retirement planning. This was one of the most ridiculous marketing messages I’ve ever heard. One that borders on malpractice from what I can tell, based on what I know about the psychology of money and the importance that personal preferences play on financial decision making.
The basic concept was to say that rather than the age old standard rule of thumb amount of money needed for retirement of 70% of pre-retirement income, the new ‘rule’ said you need to have $20 saved for every $1 of income you want to receive in retirement.
This is so totally absurd. It makes no sense and takes most of the money myths that keep you broke and wraps them into one neat and tidy message. Retirement is not based on savings at all. Retirement is based on your ability to bring enough income into your home on a monthly basis that you can live the lifestyle you desire without having to go to work everyday to earn it. It is a point in time which has nothing to do with you age, but rather when you would be financially independent.
From what I can tell, the only good thing about this new ‘rule’ is that it did break down something far off and unrelatable into a small very relatable, real, tangible number. Many people can relate to $20 so if that same message could have been related to day to day spending – then it would make sense.
